The PM has denied any wrongdoing in relation to 1MDB and is reportedly considering a lawsuit against the WSJ over its coverage of the issue.

However, the expose, one of the worst political crises to embroil the 61-year old leader, appears to have triggered a serious backlash among voters. An analysis by social media research firm Politweet of 600 Malaysians on Twitter from July 3 to July 7 found that 85.5 percent of users felt negatively about the PM. Nearly 40 percent believed he should step down immediately.

Former PM Mahathir Mohamad has also demanded his resignation. "The person who has shamed the country is Najib and his 1MDB. Before this, the country was never ridiculed like this," he wrote in a recent blog post.

The investigation is the latest in a series of problems surrounding 1MDB. The troubled state-fund, whose advisory board is chaired by the PM, reportedly has a $11.6 billion debt load and investors are afraid of a public bailout even as the recent oil price crash strains the crude-exporting economy's finances.

The graft probe helped push the ringgit to its lowest level since the Asian Financial Crisis last week. Yet, experts say PM Razak will ride out the crisis relatively unscathed.

"Politically, his image is of course greatly affected but he will be able to survive because either the opposition or those in the party against him don't have enough members of parliament to topple him," said Oh Ei Sun, senior fellow at Nanyang Technological University and former political secretary to the PM from 2009-2011.

"If the allegations turn out to be true, Najib will have to clarify for what purpose. If they are not true, he will definitely be taking legal action against the WSJ. But he does need to do something more decisive than just denying the allegations for now," he added.

The country's ruling political party is the United Malays National Organization (UMNO), which has been in power since Malaysia become an independent nation in 1957. A number of MPs within UMNO threw their support behind the PM last week, according to Malaysian news media.

The PM isn't in any danger just yet, echoed Murray Hiebert, a senior fellow at the Center for Strategic and International Studies, also pointing to the rock-solid support he enjoys within UMNO.

"If no real linkages are found to the PM during investigations, Najib can muddle through but it's really distracting the country from bigger issues like its economic slowdown."

Indeed, a weak fiscal position and a declining current account surplus are key worries for Kuala Lumpur, Fitch warned in a ratings review earlier this month. Malaysian government debt as a share of gross domestic product was 53.9 percent at the end of last year, above the median range, it said. That is especially problematic as the U.S. gets set to tighten monetary policy, which could see domestic interest rates rise and trigger capital outflows.

The allegations are being referred to as a smoking gun, but William Case, professor at the Southeast Asia Research Center of the City University of Hong Kong, points to the fact that the PM has direct control over the investigation process as well as a long history of surviving scandals. One of the most high-profile of these was the 2006 murder of a Mongolian model, which made Malaysian headlines due to her alleged involvement in past government negotiations for a $1.1 billion purchase of French submarines.

Moreover, Case warned that there is no obvious replacement for the PM even in the event that he did resign, adding nobody else in the upper echelons of government could operate internationally and domestically in the way he does.